Financial Post, Weekly edition,
Mon 20 Jun 88,
page 42. Editorial.

Summit may move on debt, subsidies

External Affiars Minister Joe Clark says to expect ''momentum but
no miracles'' from the Toronto Economic Summit. That's a good way
to describe what is likely to be the outcome of this gathering of
leaders of the seven major industrial countries and the president
of the European Community.

If the momentum is of sufficient force to lead toward long-term
solutions to some of the tough problems confronting the leaders,
the Toronto meeting will record a solid achievement.

Brian Mulroney:

Canada's example

There are hopeful signs. Prime Minister Brian Mulroney will press
the leaders to send a strong message to the General Agreement on
Tariffs & Trade mid-term meeting in December in Montreal that the
political will does indeed exist to begin to tear down
agricultural subsidies.

Mulroney told The Financial Post's Ottawa bureau chief, Hyman
Solomon (p. 1), that he wants ''a direct signal to negotiators
that the political will exists for change.'' Agricultural
subsidies are a politically sensitive issue in all summit
countries. And Canada, as international comparisons have shown, is
a big-league subsidizer.

An attack on subsidies has strong support from the Business Council
on National Issues. This week, the council called for a program
that includes a common basis for measuring trade-distorting
agricultural subsidies; a freeze on agricultural production and
export subsidy levels followed by real reductions in 1989-90;
reductions in barriers to market access; and agreement on
management of agricultural surpluses to avoid disruption of world
markets.''

Mulroney seems ready to take the ''political heat'' that comes with
cutting back on subsidies. But he is not willing to take the heat
all by himself. ''Don't ask me to sacrifice a single Canadian
farmer in Saskatchewan or Manitoba unless we see both the clarity
and the commonality of the signal which will be sent from the
summit to Montreal,'' he said. U.S. President Ronald Reagan and
British Prime Minister Margaret Thatcher are on side on the
subsidy issue, but Mulroney will have his work cut out to get the
other summiteers to agree to move against subsidies.

There is also the likelihood of some ''momentum'' on the Third
World debt issue. Canada is in the forefront of a move to ease the
debt burden on the poorest countries, mainly those in sub-Saharan
Africa. Mulroney has credibility on this issue because of Canada's
forgiveness last fall of development assistance debt for 13
sub-Saharan countries.

What may emerge from the summit is agreement on a ''menu'' of
options in which debtor and creditor nations can work out debt
rescheduling and concessional deals on an individual basis. In
addition to some forgiveness, this could include rescheduling
paybacks at lower than market interest rates.

Last week, President Mitterrand of France sent letters to the other
summit leaders proposing that there be agreement at the summit to
cancel one third of the debt of the poorest nations. With Canada's
example before them, there could well be action on this front in
Toronto.